Making Prices Seem Smaller Than They Are

Sep 29, 2015

Research shows that smaller looking/sounding prices are perceived as actually being smaller and more attractive, and this can be applied to selling flowers.

In the paper "Comma N' cents in pricing: The effects of auditory representation encoding on price magnitude perceptions" researchers Keith S. Coulter, Pilsik Choi and Kent B. Monroe proved that the way a price is "encoded" and represented has an impact on the way it is perceived by customers:

"consumers non-consciously perceive that there is a positive relationship between syllabic length and numerical magnitude."

In other words the larger a price looks/sounds, in terms of the number of syllables, the larger and more expensive it seems:

"When price information is presented and encoded in verbal format, then increasing the syllabic length of the price information will (a) increase the amount of time required to process that information, and (b) increase consumers' perceptions of its numerical magnitude."

Cents

Should cents be included when representing price?

"If cents digits are added to a price, then consumers' numerical magnitude perceptions will increase by a greater percentage amount than the actual increase in numerical value of those cents digits."

The restaurant menu shown below makes great use of these best practices.

First - no dollar signs. Second - no cents.

Whenever possible this approach to pricing was mirrored by the (very well trained) server. When they mentioned the specials they did not say:

"The soup of the day, Minestrone, is nine dollars, and the pasta special is fifteen dollars".

Instead, they correctly left out the "dollar" part (which can safely be assumed) and provided only the numbers:

"The soup of the day, Minestrone, is nine, and the pasta special is fifteen".

They were helped by the fact that all of the items were round number, with no cents. The worst possible delivery for the server would have been:

"The soup of the day, Minestrone, is nine dollars and ninety-nine cents, and the pasta special is fifteen dollars and ninety-nine cents".

And now we see how this is relevant to the flower business, where every day florists take orders over the phone. This research shows that this type of presentation:

"We have a get-well arrangement at forty-nine dollars and ninety-nine cents..."

Will be less effective than:

"We have a get-well arrangement at forty-nine."

Please note that this menu also uses anchoring very effectively. The large numbers at the top of each section act as anchors, making the smaller numbers below feel like relative bargains. There is a kind of "wow - I just found an $x item in the $y section of the menu" pleasant surprise. Also, there are also some other proven menu tricks. For example, the prices do not align (the numbers are not stacked one above each other in a neat column), making a comparison more difficult. Also – menu items are not sorted by price which, again, makes basing selection on price more difficult.

Commas (To Separate Thousands)

Commas are often used to separate thousands from hundreds - for example $4.999.99". What effect does this have on perceived magnitude of price?

"If commas are inserted to separate the thousands digit from the hundreds digit in four dollar-digit prices, then the length of the auditory representations of these prices will increase in comparison to the same prices without commas. H3. If the length of the auditory representations increases, then in comparison to the same prices without commas, consumers will perceive the magnitude of those prices to be higher."

Commas are often used to separate thousands from hundreds - for example $4.999.99". What effect does this have on perceived magnitude of price?

In the flower business the only time this is likely to be relevant is when quoting weddings and events. In these cases it seems that leaving comma separators out of your quotes is a good idea.

Same thing when speaking the price. Imagine your quote for a wedding is $2500. If you were giving that information over the phone don't say "two thousand, five hundred dollars" (8 syllables). Instead say "twenty-five hundred" (5 syllables, and less emphasis on 'thousands').

Charm Pricing

This research seems to contradict much of the research on charm pricing, which shows that charm pricing increases demand:

...numerous studies involving 9-ending prices have demonstrated that prices set at values “just-below” the nearest whole number (e.g., $46.99, compared to $47) generate greater-than-expected demand at that level (see Schindler, 1991 for a discussion). Thus, the question arises as to where within a given range of prices and under what circumstances the negative effects associated with greater syllabic length would outweigh the positive effects of presenting a “just-below” price. The authors suggest that future studies might be directed toward an investigation of this issue.

Charm pricing research (including the most widely used example) often used prices that did not include cents. It shows for example that $49 outsells $45, and the comma N' cents research above shows that $49 is likely to outsell $49.99.